POG

This is my theory.  Mine.  Not based on anything other than my own suspicion and opinion.

When you need cash or need to shift cash urgently, the first thing you sell desperately is what you can get most of.  While the price of gold has fallen sharply, it was below USD$1000 per oz for a long time too.

However, because of its value as a hedge, a value standard, a currency and a precious metal, it can also be stored as hoard or worse, traded without any physical holding.

My suspicion is gold is sold without physical exchange of the metal.  An imaginary price.  Or a hoard has been sold, too.  In the long run, if gold cannot be materialized either through clever marketing or alchemy, then it has to be recycled or dug up from the ground.  Hence, at this kind of price today, the supply will dry up.  Not altogether but significantly.  And then the supply-demand equation will rule again.

If you read PIR's announcement yesterday, it was using USD$1300 per oz in its feasibility study.  But even at USD$1200 per oz, it is still profitable.  But in current sentiment, the market treats it as "so what?"

Just one set of good data...

Just one set of good data from the USA on housing and the markets all went up.  How the hell do these big investors decide, based on one set of figures?  These people must believe that one sparrow means summer is here.  Actually, you only need one to believe, and the whole lot of them will follow.  But who is leader?  Certainly not Warren Buffett.  He does not trade and only buys when it is good value in a business he understands.  However, he is of a different class.  We buy a share in a company; he buys THE management of the company.

I am still on the sideline with very, very low buy bids trying to angle for desperados.  All the financial problems of the world have not gone away.  For Australia, more are coming...

Triple crunch

When everyone's worth is tumbling, then you can take some consolation in that fact.  But if your portfolio tumbles more than others, then you will be in trouble... especially if you have margin lending.  Well, I am lucky to have no debt.  And my wife had insisted on keeping some cash as we will need to move to a city property in a decade's time.  Mulgoa house is too expensive and too labour intensive to maintain.

In the last 6 months, I have experienced a big loss but with no regrets.  My problem is to recognize when is the trough.  Value of commodities cannot keep falling as there is a cost to exploring, mining and shipping.  As expensive mines close, the supply will diminish. 

POG

What a plunge!

Yet, the sellers don't seem to realize that it is not possible to meet the demand with what is mined.  Of course, lots of gold are sold out of huge hoards.  And some gold are imaginary.  You trade gold without gold being moved!  You trade gold but it isn't physical gold!

Hence, the fall in POG cannot be indefinite.  Mines will fold when it is no longer profitable thereby, diminishing the supply even further.  The question then becomes... when to buy again.

I am sitting on the side watching the yoyo... mostly because my cash is tied up by my wife.

More than just a crunch...

In some ways, I am lucky I am not retired yet.  And during the last year, my wife wants me to stay cashed up to buy a property for our retirement in the city.   Uncle Wayne also restricted the amount of money that I can pump into my super.  With those two factors, I have been curtailed.  Well, I would have made a bigger loss otherwise!

I still bought shares but the trading has been grossly diminished.  Nothing is spared today.  However, with the American economy progressing well, it is difficult to comprehend how savage the fall in value is on the market today.

Another crunch...

You wonder how low can it go!  This is worse than GFC.  At least with GFC, I knew that it cannot continue because with total credit crunch, the world will grind to a halt.  Governments have to do something to instill confidence.

Today, it is just investors' lack of confidence in the market.  People are just dumping.  There are bad news around of course.  But these bad news propagate further bad news.  And this time around, governments are limp and cannot do much.

I suspect the price will continue to plunge so I have dropped my buy prices for some stocks to ridiculous level.  You never know how many desperados there are around!

Further plunge...

In the last six months, I have not bought as much shares as I would have.  That is fortuitous!  That decision wasn't mine.  My wife wants some cash kept aside and not be pumped into the ASX.  I have always known... my wife is smarter than me!

Terrible performance

I never worry about indices going up or down... as long as I get alpha.  If an index fall, I like to fall less.  And if an index rise, I want my average to rise higher.

But lately, it has been the opposite.  That spells very bad news for me.  However, I still stand by my own convictions that you cannot sell off stocks that announce good news.  And stocks that give good dividends will eventually ride out the downturn.  It is disheartening though when the poor performance continues to deteriorate.  You wonder how long can it continue.

Uranium

A few pundits have been predicting the rise of uranium price.  The US-Russian agreement ends this year and the Russians have become a bit smarter in learning about capitalism.  They sold their surplus processed uranium from their decommissioned nuclear warheads for pittance to the Yankees under a treaty.  Suckers!

The price of uranium appears to have reached a long flat trough without much yoyoing.  NSW is permitted exploration but not the mining of the mineral.  Japan is restarting its nuclear powered generators.  China is continuing like no Fukushima has happened.  I don't know where the Germans are going to get their electricity from after killing off their nuclear reactors.  India will take forever to research into using thorium.

Is it time to get back into uranium stocks?  Inshallah!  The way the markets have been behaving, there is no logic.  But I predict, unprofessionally and without any financial qualification/authority, that 5-10 years from now, what is today's price will seem ridiculous... but it will probably drop a bit more because of crazy investors.  Just remember, you can't pick the real trough but others can!

SXY, BPT, COE, STO, BKP, NWE, AWE...

This is such a sexy stock yet yesterday, I picked up a small parcel to top up my holding.  Why people are selling at such a low bid price amazes me.  If the stock has been producing bad news after bad news, then I can understand.  The market is awashed with rumours of big O&G companies wanted a bite of the Australian shale gas/oil industry.  While many resource stocks of mine have gone into the penny dreadful category, those in Cooper Basin are still holding out well relatively.  STO has been listed as a takeover candidate since the SA state government liberated it on the stockmarket in the mid-2000s.  I am still waiting!

POG

There is no accountable body for the price of gold or how it is traded.  Banks can refuse to give investors their physical gold.  They give only a certificate when the metal is demanded.  Perhaps the banks has no gold at all!

The demand in developing nations is outstripping supply when the POG is down.  Yet the price continues to fall.

And if you look at the POG chart in the last year, it has to be manipulated.  It is the best yoyo show in town.  These two days, it has been bouncing up again and you can be certain, the plunge will come again.